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With Democrats retaining control of the White House and of the Senate it is very unlikely that there will be an extension of the current $5 million exemption for transferring assets to children by gift or on death. On January 1, 2013 the exemption drops to $1 million and the tax rate goes up from 35% to 55%. We strongly encourage all of our clients (and all taxpayers) to gift today and take advantage of the $5 million exemption before it disappears. The difference between what you children will get if you plan today, versus putting it off until 2013 is literally in the millions. Gift Now!

This morning, the Senate rejected a bill that would have extended the Bush-era income tax cuts. We don’t know how this issue will resolve itself, but tucked into the bill was a provision that will have a profound effect on estate tax law. What is worse, it may make your living trust obsolete at best, and dangerous at worst. We think this estate tax provision is likely to find its way into any bill that eventually passes, because both the President and the Republicans favor it.